WSJ REPORTS: Germany Is Getting Closer To Blinking, And Discussions Are Underway To Build A 'Grand Plan'

A new WSJ report out in the last hour floats the idea that Germany might be willing to cave on more support and European Federalism in exchange for more willingness on the part of other countries to cede fiscal sovereignty.

It's thin reeds, but...

"The more that other member states get involved with this development and are prepared to give up sovereign rights to get European institutions more involved, the more we will be prepared to play an active role in developing things like a banking union," a German official familiar with the discussions told The Wall Street Journal. "You can't have one without the other."

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A senior EU official said Sunday that contacts were under way among governments to pull together a "grand plan" as proposed at May's summit of European leaders.

Bear in mind that the public noises from Germany couldn't be more different.

With Europe’s debt crisis cited last week for canceled IPOs, weaker-than-expected Chinese manufacturing figures and a rise in the U.S. jobless rate, Merkel rejected joint debt issuance in the 17-nation euro area as a solution, saying “under no circumstances” would she agree to Germany-backed euro bonds.

Some “come along and ask for euro bonds, saying all we need are equal interest rates and everything will turn out all right,” Merkel said in a speech to members of her Christian Democratic Union in Berlin yesterday. Instead, what’s needed is an economic overhaul to tackle the lack of competitiveness in Europe, she said.